Kim Kardashian paid a big fine for being a crypto grifter
Model, celebrity and one-time crypto spokesperson Kim Kardashian.
Photo: Raymond Hall/GC Images
The spring of 2021 was a fierce time in cryptoland. Bitcoin was skyrocketing, but so were all the cryptocurrencies that got busted, even the ones that were meant to be a joke (remember Elon Musk’s dogecoin chain?). But it was also the moment when a series of celebrities chose to jump on the crypto bandwagon: from Backstreet Boy Nick Carter to former Celtic Paul Pierce to Hai tank investor Mark Cuban to the elderly quarterback Tom Brady. So it wasn’t particularly surprising when, on June 13, 2021, Kim Kardashian posted on her Instagram story about a cryptocurrency called EthereumMax — even though this particular shitcoin (as subprime projects are known in crypto-land) was about as shit as it gets. EthereumMax was a no-name token with no other credible backers – a cool-headed observer would guess with strong conviction that it was simply a pump and dump, designed to make a quick fortune for its founders and early investors at the expense of naive retail buyers. “Are you guys interested in crypto??” began Kardashian, ending with a series of hashtags including “#WTFEMAX” and “#AD.”
However, it turns out that influencing crypto is not the same as influencing skin care products and makeup and bras – at least not when US financial regulators consider the crypto token you’re selling to be a security (that is, more like a share of stock than a commodity or a collectible). And on Monday, Kardashian paid the SEC $1.26 million to settle allegations that she illegally promoted a cryptocurrency on her Instagram story.
At the heart of the SEC’s case was Kardashian’s failure to disclose that she was paid $250,000 for the EMAX sale, violating a 1933 Securities Act; Tagging the post “#AD” and adding the disclaimer “this is not financial advice” was not sufficient, the SEC said. While Kardashian did not admit or deny wrongdoing, she agreed to give up the fee, plus interest and a $1 million penalty, and is cooperating with the SEC’s investigation.
The case was designed to attract attention: SEC Chairman Gary Gensler himself announced the charges in a chirping at 7:30 a.m. Monday morning, when most of the agency’s enforcement actions receive only a press release. Gensler then appeared on CNBC to discuss the allegations, saying, “This is about an influencer, a high-profile celebrity, on their Instagram page posting a tout for this token, EthereumMax, which is a security, we’ve determined. ” Kardashian is just the latest in a canon of SEC attacks on celebrities hired to shill crypto projects, Gensler added: Boxer Floyd Mayweather Jr. and DJ Khaled were charged in 2018, and Steven Seagal, the martial arts actor, was punished in 2020 – all for “illegally promoting” crypto projects.
In fact, celebrities have become a major target of the SEC in its crusade against illegal securities, which Gensler has made very clear that he considers the “vast majority” of cryptocurrencies to be (because unlike stocks, they are unregistered). But it also means the SEC has an enforcement problem, as it now faces hundreds of potentially illegal shitcoins (as they are commonly known) on the market, as well as armies of individuals paid to promote them. Tasked with policing the fraudulent landscape but hampered by a lack of staff, the SEC seems resigned to going after the Kardashians and Seagals, and in doing so, creates the illusion that it has made crypto a safer place.
It’s also why some of the biggest US crypto companies have recently found themselves in the crosshairs of the SEC, including crypto exchange Coinbase (which is reportedly being investigated for illegal securities trading), and Ripple, which is currently in court fighting The SEC charges that they conducted an illegal securities offering.
And the SEC’s strategy would make sense if it believed that by punishing the most notorious violators, others would try to avoid the same missteps. But judging by the lack of a deterrent effect in the movements again Mayweather or DJ Khaled, it hasn’t quite worked out that way. It remains to be seen if the SEC will also try to fine some of the other celebrities who have recently thrown their support behind various (generally condemned) coins.
And what happened to EthereumMax, the project Kardashian was running? It is down 99 per cent from the peaks of last spring – but it was down 20 per cent this morning on the news of the settlement.
